Rappi

This "off the record" podcast is available only to the avra community and please treat this as confidential.
Simon candidly walks through his biggest lessons scaling Rappi to 20M orders/month and profitability.

‍

Takeaways‍

(15 minutes)

Rappi Overview

• Rappi is Latin America’s “delivery of everything” app where customers can order anything they need in one app
• Rappi is active across 9 countries and 300 cities and delivers over 20 million orders per month for customers
• 4,000 FTEs. 1,000 in EPD in Colombia and Argentina. 1,000 in vertical roles. 2,000 in commercial city-level roles

Only 1 in 10 of Our Execs Worked Out

• Initially, Rappi grew the company with a core team of generalists that jumped between needed roles
• This core group would shift between different verticals or problem spaces regularly and it worked really well
• Eventually, problems became too big and this didn’t scale. About 3 years ago, they brought in reinforcements
• They hired 10 significant leaders and 50 in more intermediate leadership roles at the company. It didn’t work.
• Only 1 of the 10 leadership hires worked - their Head of HR. He thrived because he had a bias to action

Simon’s Lessons

• Hiring leaders that were too senior: They gravitated to hire “managers of managers” from other scaled startups like MercadoLibre in Latin America. They thought these leaders would uplevel the capabilities of the team as they hired accomplished people. The problem was these leaders didn’t want to actually do the work – they wanted to manage teams and build organizations. This didn’t fit with the stage of Rappi where leaders were expected to be in the “mud” with teams

Simon on hiring too senior

“Number one, bringing people that were a bit too senior for the moment of the company. So these people were managers of managers. And we have a very strong culture of builders at Rappi. So if people at Rappi don't see their leaders in the mud working with teams there is an issue. They don't really respect those leaders, so we had a lot of super high level managers that were very smart people. It was a disaster system.”

• Lack of value alignment: They didn’t hire leaders with similar cultural alignment and working styles. Because they didn’t know what they were looking for, they thought they needed scaled leaders and doubted their instincts. The reality is they needed someone with different skills, but with the work ethic and values authentic to Rappi.

Simon on lack of value alignment

“We had no idea what we were looking for. We were missing some skills and these people apparently had those skills, but we were a bit insecure. We stopped trusting our gut and trusting our values. And we thought that we needed people different from us. And maybe the learning is that we needed people with different skills than us, but not different in terms of values and virtues.”

• Life stage: They hired people with great stories of how they used to work super hard, but the reality is that these were stories of the past and they weren’t willing to do the work anymore. It’s ok to hire senior, but it's important to understand if whoever you hire is willing to put in the time and effort required to run an early stage company.”

Turning Point: Building a Cohesive Team

• Initially, Rappi overcorrected and turned inward. Simon rationalized not hiring executives by telling himself that Rappi was a complex business that an outsider would have a difficult time understanding. Eventually, with a push from the board, they rebuilt their executive team taking into account prior hiring mistakes

What did Rappi look for in V2?
Characteristics

• Direct experience in the best-in-class companies in the industry: Rappi hired from DoorDash and Amazon, which are widely considered two of the best delivery platforms globally with exceptional operational discipline and rigor.
• Shared values and ways of working: Learning from their mistakes, they focused on leaders with new skills (more rigor, operational discipline, seen 10x the scale) while optimizing for people with a “builder” mentality that were humble and willing to get in the weeds. This was important to succeed within Rappi
• Willingness to invest in the next generation: Rappi’s team is hardworking and passionate, but they needed the next set of leaders to invest in their growth and success. They needed leaders humble enough to be in the details while investing in team growth

Geography

• They didn’t constrain themselves to Latin America. Prior to COVID, Rappi required people to move to LatAm. After COVID, they became comfortable with working remotely. As a result, they started to hire from US markets and let people live in Austin and other cities. This massively widened the caliber of talent available to Rappi

Outcomes

• Today, they have a cohesive team from DoorDash, Amazon, Stripe, Houzz based in Austin and LatAm

Example: Rappi's v2 Executive Hiring Outcomes

Reaccelerating: Operating the “Amazon Way”

• Rappi, leveraging the prior experience of executives, shifted the entire operating cadence of the company

Example: Operating Cadence Changes

• Rappi shifted to metrics focused on a weekly, biweekly, and quarterly cadence. Their philosophy became “if you want to hit the quarter, you need to hit the month, if you want to hit the month, you need to hit the week.” This worked super well and focused on the company on the right metrics and projects.

Weekly Business Review (WBR)
‍Amazon WBR

• The standard Amazon WBR is a meeting where leaders review a giant list of input metrics in a meeting
• If a metric is not tracking, you question the DRI. The DRI is responsible for presenting a recovery plan

Who/When

• Top 70 leaders. 90 minutes on Wednesday each week

Structure of Meeting

• When they first adopted this, they were burning $120M/quarter and needed to reach profitability Therefore, they couldn’t focus on inputs. They had to focus on financial metrics until profitability
• In the first iteration of their WBR, they would review the P&L line by line versus a set of inputs
• If something was not trending, the DRI would have to present a plan or raise their hand to get help
• This helped Rappi improve their profitability trajectory. Today, they generate $10M/quarter of EBITDA

New Structure

• Despite being initially successful, the process took something valuable away because it was P&L driven
• Now that they are in a strong financial position, they began introducing input metrics to the WBR process

Who creates materials?

• FP&A team produces materials with inputs from each team
• Each team is asked to fill in numbers, what they are working on, and if they need resources
• Each team does a pre-meeting with FP&A on Tuesday to make sure everything is ready for Wednesday

Biweekly Reviews
‍Who/When

• 1x every other week. Organized by vertical/team
• Meeting typically includes a team of 6 people + CEO/CFO/COO

Structure

• Review progress against goals and initiatives (similar to WBR)

How do you decide which teams to meet?

• Every quarter, the core executive team decides the teams they will meet with on a biweekly basis
• Typically, they focus on important projects or new verticals they are trying to grow

Quarterly Exec Meeting
‍Who/When

• 1x per quarter. Top 70 execs meet for 1 week in a physical location

Structure

• Hard work. Daily meetings from 8am to 9pm
• Each team prepares their quarterly plans and presents them at the offsite
• Goal is to 1) finalize quarter goals, 2) drive alignment across teams, and 3) handshake (agree on dependencies)

Daily CEO Review

• Every morning at 7:30 Simon gets a report of 100 metrics that are important to the business
• If everything is OK, he goes on with his agenda. If something is very off, he starts sending messages/emails

Example: Cultural Shifts

• Rappi shifted to metrics focused on a weekly, biweekly, and quarterly cadence. Their philosophy became “if you want to hit the quarter, you need to hit the month, if you want to hit the month, you need to hit the week.” This worked super well and focused on the company on the right metrics and projects.
• They made two big changes: 1) shifted to a 6-page memo culture and 2) shifted to all English workplace
• It was a difficult transition - particularly for native-Spanish speakers that were less comfortable in English
• At first, Simon pushed the decision. Eventually, the team bought into the shift because 1) it started working and 2) the new leaders were fantastic. It inspired the team to aspire to shift from “builders” to “world-class operators”

Simon on Rappi’s cultural shifts

“It's been hard. But thankfully the level of the new guys is so good that they have been able to inspire others to become world class operators. We were builders, but now most of us want to become world class operators. So raising the bar has been a big motivation for us to go through the hurdles of English and reading documents and all that. And then also, it has worked for us. So the beginning was hard. But we had a good excuse. These [new executives] don’t speak Spanish. So we have to do it. It was a big change, but then it started to work. And when people start seeing progress, they believe.”

We Were Throwing Money at Problems

• Raised more than $2B in total. In hindsight, they didn’t have the experience of sophistication of measurement to deploy this much capital at the time. If they raised $2B today, they think they could generate 100x more value
• At the time, they were in a land grab with Uber, Didi, and iFood (Brazil). Burn peaked at $480M/year in this period
• The environment and their balance sheet (>$1B) led them to throw money at problems versus sustainable levers

Examples: “bad habits” formed by too big a balance sheet

Breaking Merchant Exclusivities

• Instead of convincing merchants to work with Rappi through better product and economics, Rappi wrote cheques to break their exclusivity. This wasn’t sustainable as they weren’t building sustainable value to win merchants

Merchant GTM

• In an effort to grow fast, Rappi hired hundreds of GTM representatives to acquire merchants without the right tools
• Sales reps didn’t have the necessary internal tools to 1) identify merchants, 2) price merchants, and 3) sell well
• This team ended up acquiring hundreds of merchants, but many of them were low quality and churned off Rappi
• In hindsight, he would have built a smaller team and supported them with exceptional internal tools to win deals

Giving into team requests for new hires

• When you have $1B on the balance sheet, it’s hard to say no to requests to grow a team
• While you might maintain frugality as the founder, it will be hard for your team to do the same
• In hindsight, Simon would have raised just what they needed to enforce good habits and limit overall dilution

Simon on the impacts of a big balance sheet

“Knowing that this is off-the-record. But we raised more than $2 billion. And we think if we raised $2 billion today, it would be 100 times more [effective]. Because of the lack of experience and lack of sophistication in measurement. We were also in a land grab with Uber and iFood. So the nature of that land grab was super hard. But even with all of that, it's very clear that we were also a bit lazy and solving problems with money. Because every issue had sufficient money to say, okay, hire 10 Guys and throw money to solve issues. That was very bad for us and for our culture.”

Competition is Good for Rappi

• Competition has been amazing for Rappi in the sense that it forced Rappi to up their game for consumers
• Rappi uses competition to push teams and to put good pressure on teams to move faster and to execute

Example: Using competition to drive outcomes

• As an example, they launched Rappi 10-minute delivery a few years ago
• Initially, it was growing very slowly because there was no competition and the team was comfortable
• Overnight this changed when a company raised $150M to compete directly in the 10-minute delivery market
• Despite having few resources allocated to their project, the team accelerated and learned to grow with less
• It became a point of pride to make the business work with less money and forced the team to be resourceful

Simon on focusing on using competition to your advantage

“We're very proud about our 10 minute delivery service. You can order 2000 SKUs and we deliver on average in 8.3 minutes. It's crazy good. But when we started it was going a bit slowly. Then a company raised like 150 million and came to Latin America and started opening stores. And then we had this excuse to tell our teams: Okay, guys, we have to move or else other companies are going to come. At that moment we had a lot less money for that business unit. So there was a lot of pride about making this work with less money. And we had to be more creative and all that. So we use competition to feel our teams and to put good pressure on them.”

Simon Thinks About Competition Everyday

• Initially Rappi won because they are multi vertical, but now companies like Uber also deliver across verticals
• Now, their goal is to win across the key selection drivers in every microzone they operate across 300+ cities
• They scrape competition in terms of prices, restaurants per zone, and other metrics to benchmark performance

Simon on competition

“We scrape the competition in terms of price, in terms of the number of restaurants per microzone, etc. We are not Amazon that says we don't think about competition. We do think a lot about competition. And we have to beat them in every microzone. That's it. So we're very intense in reviewing their prices and assortment capabilities.”

Rappi: LatAm’s AI Concierge?

• AI is already making an impact with Rappi. The company saves $800K/month using basic LLMs for support
• They are working on a centralized data model across all their services (CX, pricing, assortment, catalog, etc)
• They want to use it to understand a user better and to build better experiences for customers
• A few ideas they plan to work on: AI agents for support pre checkout sales assistants, two-way search
• Simon believes Rappi is positioned to be LatAm’s AI concierge with millions of merchants/consumers on platform

Simon on AI at Rappi

“[The data model] is going to be the foundation for everything. Amazing AI agents for support. But then also pre-check out sales assistants. But then also, within the search, we can clarify intent with two way conversations. That's going to be super helpful…If we're able to build this, I think Rappi is going to be in a good position to be the AI concierge for people in Latin America because we have that delivery network, the assortment, connections with hundreds of 1000s of retailers, and we can do anything for you….I think that's gonna be super useful for our users.”

Fundraising

• 500-600 people. $20M/month GMV and 5x y/y growth, but $5M-$6M/month burn (high growth w/ high burn)
• They wanted to fundraise to accelerate investments they were making into the business across each vertical
• They spent about 6 weeks fundraising in San Francisco and received more than 50 “nos” from investors
• The majority of the investor “nos” were about not wanting to invest in Latin America versus Rappi’s business
• This was a strange experience - because the business was doing better than ever despite a high burn profile
• At one point, they had just 5 weeks of incremental runway to support a team of 600 people.
• Despite this, they had unwavering belief in the company and they knew they only needed one person to say “yes”
• Eventually, they were able to convince a leader investor and raised a $52M Series B at a $400M valuation 

Fundraising Best Practices

• Be humble and listen to people that know how fundraising works: Look to your trusted investors - they see a lot of fundraises and can help you prepare materials, but also strategize the right time to go out and investors to speak with.

• Most important thing is competition: You need to create competitive tension in the process. Otherwise, there is no rush to close and the fundraising process will drag on. Keep investors moving forward by using other investor milestones. As other investors progress, use their progress as a check-in opportunity for investors to keep others at the same point in your process.

Simon on the importance of creating competition

“The most important thing is it's about competition. It's about you getting enough people interested to create competition, or else, there's no rush to close and it can take forever.”

• Focus all your attention on high-signal investors: In their early rounds, they spoke with 50+ investors. This does not work as well at the growth stage because growth investors need a lot more information to make a new decision. Instead, Simon recommends speaking with 8-10 high quality people you can go very deep with. Use your mentors to identify these investors and plan your fundraise process accordingly.

Simon on focusing on a small group of investors

“For example, we, in the series A and B talked to 50 people, but then I remember it was probably you who told us, this has to be a bit different now. We're gonna select eight or maybe 10 at most that are really ideal for this moment of the company, and we're gonna go all in with them. That worked super well. The learning is [fundraising] is very different from early stage rounds. Having mentors or friends that have gone through it to help you plan for [the raise] is key.”

Recommended Reading

Working Backwards (Insights, Stories, and Secrets from Inside Amazon)